A landlord is going to court to try to recover £150,000 allegedly owed by an agency in the form of guaranteed rent.
The legal action follows the reported refusal by the agency to pay the money owed, and then the same agency’s refusal to abide by a compensation award made to the landlord by the Property Redress Scheme.
The compensation was £25,000 - the largest amount the PRS can award. The agency has now been expelled from the scheme for failing to honour the payment to the landlord, who is now taking separate legal action against the agency.
The case involved rent to rent arrangements for eight properties, which the agency allegedly struggled to fill due to the pandemic.
The landlord agreed to reduced rent payments whilst the agent tried to find tenants, but the agency then apparently failed to comply with their contractual obligations to the landlord.
The agency was also found to have used an unregistered handyman following a gas leak, resulting in the landlord reporting the incident to Gas Safe and the HSE.
This all amounted to a significant financial loss for the landlord, says a statement from the PRS.
Following the decision Sean Hooker, head of redress at the Property Redress Scheme, states: “Guaranteed rent, or rent to rent, operators are becoming more and more common in the private rented sector, as it offers a lower barrier to entry into the property market.
“Whilst there are reputable operators who have been providing the service for many years, there is a significant proportion of the market who are less experienced and need to make sure they fully understand their obligations and responsibilities.”
The Property Redress Scheme has also reported a 43 per cent increase in complaints relating to guaranteed rent since 2018.
It says this data represents a warning to any landlord contemplating rent to rent; problems such as loss of rent, damage to property and sitting tenants do occur regularly, mainly because the parties have not fully understood the complexities or made proper legal provisions in the arrangement.
Paul Shamplina, founder of Landlord Action and also the chief commercial officer at Hamilton Fraser, says: “In my view, if the rent to rent arrangement is not carried out diligently the landlord loses control of what is happening at the property and this is where the problems begin. With many years’ experience of dealing with evictions I would advise any landlords entering into such an agreement to tread very carefully.”
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